Once more we commend the Committee for undertaking this effort to review and update the Communications Act. As we have stressed in our prior Responses to the Committee, this reassessment is necessary because the Communications Act needs updating.
We agree with the Committee's characterization in its Third White Paper that takes proper account of both the technological advances and dramatic marketplace changes. In much the same language used in the Free State Foundation's First Response to the Committee, the Third White Paper explains:
The evolution of technology from analog to digital and narrowband to broadband has brought about the integration of voice, video, and data services across multiple platforms employing various technologies. The ongoing shift away from single-purpose technologies toward Internet Protocol packet-switching has rapidly called into question the adequacy of the current Communications Act and the monopolistic assumptions on which it is based.
This statement is an accurate characterization of the profound transformation that has occurred in the communications marketplace. As the White Paper states, it is against this backdrop that "an examination of competition policy and the Communications Act is warranted as part of its ongoing update efforts." In order to enhance overall consumer welfare, a new Digital Age Communications Act must be crafted in a way that requires the FCC to take into account the existence of the increasing cross-platform, facilities-based intermodal competition that characterizes the digital environment. The Committee's Third White Paper presents a number of specific and overlapping questions on competition policy. The tenor of the questions makes it clear that the Committee is especially interested, as it should be, in the role that the existence of intermodal competition should play in assessing overall market competitiveness and in formulating regulatory policy.
The generalized framework presented in this response will offer a holistic response to these separate but interrelated questions. This approach fits with our central theme that facilities-based, cross-platform intermodal competition, enabled by the rise of digital and Internet Protocol-based services, has yet to be sufficiently taken into account by the FCC in its decision-making. While new technologies continue to emerge and older technologies evolve in unpredictable ways, at present the communications marketplace is impacted positively by competition among cable firms, telephone companies, satellite operators, fiber providers, and various sorts of wireless companies, each employing their own facilities. In order to encourage the further development of intermodal platform competition on a long-run sustainable basis, the Commission must avoid adopting policies that, in effect, seek to "manage" competition through resale and sharing mandates. What is needed in its place is a consistent, principled competition policy framework premised on facilitating free entry and exit as the basic rule, which should then be qualified by targeted ex post remedies rather than by prescriptive ex ante regulation.
Stated otherwise, a combination of rapid technological innovation, consumer choice, and disruptive changes in the communications market has altered forever the traditional competitive landscape. These profound structural and technological changes point to the need for a competition policy that leaves free from government regulation those market processes that continue to propel further innovation and competition for new services. Regulatory intervention is only warranted in instances where there is convincing evidence of a market failure that is likely to harm consumers. Absent such evidence of market failure, service and product suppliers should be free to exercise their informed business judgment in an entrepreneurial fashion. Their success will be shaped by how an ever more sophisticated generation of telecommunications consumers respond to their business offers. The interaction of both sides of the market place will outperform any effort by the FCC to chart through government design the direction of future innovations in the ever larger and more complex Internet marketplace.
To this end, under a revised Communications Act, FCC oversight of the modern communications marketplace should be conducted pursuant to a consumer welfare-based standard that relies heavily on antitrust-like microeconomic analysis. That is, the FCC's competition policy should be oriented toward the economically productive and efficient processes by which market participants bring innovative products and services to consumers and respond to changing consumer demands, rather than to any preconceived notions by government officials concerning the shape of the market or the terms and conditions under which services may be offered. From an institutional standpoint, the FCC's competition policy should be geared much more toward ex post adjudications than broad ex ante prescriptive rulemakings.
A PDF of the complete Response, with footnotes, is here.
Randolph J. May, President of the Free State Foundation, is a former FCC Associate General Counsel and a former Chairman of the American Bar Association's Section of Administrative Law and Regulatory Practice. Mr. May is a public member of the Administrative Conference of the United States, and a Fellow at the National Academy of Public Administration.
Mr. May is a nationally recognized expert in communications law, Internet law and policy, and administrative law and regulatory practice. He is the author of more than 150 scholarly articles and essays on communications law and policy, administrative law, and constitutional law. Most recently, Mr. May is the editor of the new book, "Communications Law and Policy in the Digital Age: The Next Five Years." He is the author of A Call for a Radical New Communications Policy: Proposals for Free Market Reform. And he is the editor of the book, New Directions in Communications Policy and co-editor of other two books on communications law and policy: Net Neutrality or Net Neutering: Should Broadband Internet Services Be Regulated? and Communications Deregulation and FCC Reform.
